A Niche In the Short Sale Game

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When I think about the opportunities and marketing efforts associated with short sales, I picture the typical family who has fallen victim to this recession. Perhaps it’s a husband whose job has been eliminated, resulting in the inability to pay the mortgage. Or, maybe it’s a family whose mortgage has adjusted, the payment has become unreasonable, and they are upside down on their mortgage as a result of plummeting real estate values.  For most investors, these are the typical scenarios that one would expect to find when marketing for short sale opportunities. While this is true, I have found that there is another fairly common scenario that many investors overlook: other investors!

During the run up to the real estate crash, speculation was at an all-time high. Mortgage companies were handing out loans like candy and investors were buying properties at prices and with terms that made no sense whatsoever. I vividly remember the horrendous Option ARM loans that were being underwritten for investors with no documentation! Imagine, buying an investment property with no documentation of income and the ability to pay less than the amortized amount month after month. It’s no wonder the real estate market took a nose dive.

While the recovery from this out-of-control speculation is long and difficult, it does present numerous opportunities for current investors. Case and point: I just received short sale approval today from a bank who had made a loan on an investment property in 2007. The property had been fully rehabbed just 4 years ago and the same tenant has been in place since this time. However, I was able to buy it for a quarter of what the investor had paid for it just 4 years ago. While this may seem like an extreme, there are more opportunities like this than most investors realize.

While most people assume that a rented property is a stable property, it does not necessarily mean the property owner is in a good financial position. As was the case with the property I am buying, the investor was hurting as a result of her other properties and needed to sell everything. As a result, I was able to buy a property with a solid tenant and tremendous cashflow.

To those investors who are looking for opportunities in the short sale market, let this serve as a reminder that owner occupants are not the only potential sellers. In fact, investors may present the better opportunity as the property may have been renovated recently and/or there is the possibility that the property could be currently rented. It’s unfortunate for those investors who happened to buy at the wrong end of the real estate cycle … but for those investors who are still in a position to buy, the opportunity to buy at unprecedented prices is now.

About Author

Ken Corsini

Ken Corsini G+ is the host of the Deal Farm Podcast (on iTunes) and has 10 years of full-time real estate investing experience. His company, Georgia Residential Partners buys and sells an average of 100 deals per year and has helped hundreds of investors around the country make great investments in the Atlanta market. Ken has a business degree from the University of Georgia and a Master Degree in Building Construction from Georgia Tech. He currently resides in Woodstock, Georgia with his wife and 3 children.

6 Comments

  1. The time to buy investment real estate is now especially In Central Florida where we see these same case scenarios at a higher rate than many areas across the country. What we are finding along with the great prices on investment realty is the higher class of renter. The people renting your investments are typically former home owners. This in turn puts a tenant into your property that cares and has much more respect for your home than tenants in previous years. My investors are seeing a wave of better more responsible renters which in turn is a big win in investment real estate.

  2. I would add that the investor on the buy side would have to be properly educated and understand that just because it’s a short sale does not mean he’s going to get it for 60cents on the dollar.

    As you know there is a tremendous difference when working with a well educated investor who understands what the outcome may be and the speculator who offers a low bid and then walks when the bank counters to a more realistic value.

  3. This seems to be true in the majority of cities across the country. People everywhere are sparking up conversations about this new class of renters (previous home owners) and the care in which they dedicate to their rentals.

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